James O’Toole wrote for CNN Money 6 May 2013, SEC sues financially troubled Harrisburg,
The Securities and Exchange Commission has sued the city of Harrisburg for fraud, alleging that officials in the Pennsylvania capital misled the public about the city’s financial condition.
The SEC says the misleading statements came in the city’s 2009 budget report, its annual and mid-year financial statements and a “State of the City” address. The case marks the first time the SEC has charged a municipality with misleading investors in statements made outside of securities documents.
Harrisburg has been mired in
financial difficulties for years. The situation dates back to over a decade ago, when the city decided to upgrade a trash incinerator. Harrisburg was counting on revenue from the project to cover the cost of financing it, but instead, it left the city with over $300 million in debt.
“In an information vacuum caused by Harrisburg’s failure to provide accurate information about its deteriorating financial condition, municipal investors had to rely on other public statements misrepresenting city finances,” the SEC’s George Canellos said in a statement.